Asian Journal of Innovation and Policy

Asian Society for Innovation and Policy (아시아기술혁신학회)
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Managing Information Asymmetry Risks Using Deal Syndication and Domain Specialization: An Indian Context

  • Joshi, Kshitija (National Institute of Advanced Studies, Indian Institute of Science Campus)
  • Received : 2017.08.29
  • Accepted : 2018.02.26
  • Published : 2018.04.30
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Abstract

We review two specific risk management strategies of venture capitalists (VCs): deal syndication and domain specialization with respect to their explicit role in adjudging and managing the overall magnitude of information asymmetry risks. These are analyzed for three distinct categories of VC firms as classified by their funding stage focus (early vs. late), ownership type (foreign vs. domestic) and the human capital composition of the core VC team (entrepreneurial vs. investor). The analysis is based on both secondary data and primary data for active 72 VC firms in India. Syndication is moderately important for entrepreneurial VC firms, but not at all important for early-stage focused and foreign VC firms. This finding is distinctly different from what has been conventionally observed in the literature. Among the various arenas of domain specialization, high-technology focus is important for all segments of VC firms. In the context of investment-stage focus, foreign VC firms exhibit growth-stage specialization, while entrepreneurial VC firms concentrate on earlier investment stages.

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